Consumer behavior is changing dramatically in the face of COVID-19. If you don’t plan for the future today, you may find tomorrow’s too late.

While the immediate response to COVID-19 seems all-consuming, we still need to think of this pandemic in phases. There’s what we must do “now” to manage business continuity, what we must do “next” to prepare for the new normal and the need to accelerate digital transformation, and what we must do “beyond” COVID-19 to be in a position to create value for the longer term. China’s recovery provides a critical lesson: you need all three tracks of strategy under way to be prepared for each time horizon. Because if you don’t work in parallel, you risk being left behind.

The problem? Reimagining your customer strategy is challenging enough when consumer behavior is stable and predictable; it’s exponentially more difficult when the way we live, eat, and shop is changing rapidly and radically. So, what do we know? The EY Future Consumer Indexfinds four segments emerging:

35 % of people are in what we call “save and stockpile,” worried about their families and pessimistic about COVID-19’s long-term effects

27% have “cut deep,” reducing spending across all categories

26% are “stay calm, carry on,” with largely unchanged spending habits

11% are “hibernate and spend,” best positioned to cope, optimistic about the future, and spending more

So, these are the immediate changes. But we know the pandemic is also forcing a reassessment of values, habits and consumption patterns, and many of these won’t reverse. While the EY Index finds a majority of consumers expect spending to be the same or more after the COVID-19 crisis (31% expect spending to be unchanged, 25% plan to spend more in areas important to them, and 9% intend to spend more across the board), more than a third plan to spend less – and 13% of all consumers plan to make deep cuts.

Add to this mix a host of other changes, from greater working from home accelerating e-commerce and shifting attitudes to digital privacy, and the priority is clear. Leaders need to quickly re-think digital transformation agendas to ensure they position your brands correctly, build foundations for lasting relationships with consumers, and use data and technology to help you understand the new levers for continuous and dynamic optimization. It’s too late to undertake this work when the consumer environment seems more predictable. Even though the duration of the pandemic is uncertain, you must manage the challenges around their customers today, while setting yourself up for rapid stabilization and customer growth in the future.

We see action across four customer-strategy areas as critical to achieving lasting impact and creating value:

Customer engagement – driven by disciplined approaches to consumer segmentation and lead generation, and moving faster to drive marketing and communications agility

Growth drivers – shifting the mix to new sales channels and extracting value from existing innovation to drive product strategy

Customer experience – prioritizing customer journeys and new means of engagement, experience and service

The first step is creating a customer strategy and action plan by carefully canvassing these issues and defining key priorities for each. Time is of the essence: as economic activity returns, the full extent to which consumers have been pulled into a new era of digital behavior will become clear. If you’re lagging now, you may find yourself far behind, struggling to adapt old business models to a new world. Here’s your roadmap.

Related article

(Chapter breaker)

1

Chapter 1

Customer engagement

Take disciplined approach to consumer segmentation, lead generation and nurturing.

An experience like COVID-19 exposes extremes in socio-economic, experiential, and environmental conditions by geography and consumer segments. How well do you understand your customers across these dimensions? The EY Index shows a third of consumers plan to reappraise the things they value most and not take certain things for granted. Do you know what those “things” are? It’s more critical than ever to be able to segment customers using first- and third-party data and use specific personas to listen to their needs, implement precise customer engagement strategies, and deploy personalization tactics.

Refresh loyalty programs to account for new digital and experiential means of engagement and new customers

Build a feedback capability to incorporate changes in customer behavior and evolve to meet changing expectations across products and services

Build real-time, dynamic customer segments and personas to drive modeling and lead generation, using robust automation to integrate the appropriate data across tools and workflows

Move faster to drive marketing and communications agility

Barely a month ago, companies were reaping the ongoing gains of a decade of economic growth. Today? Luxury-goods group LVMH has redeployed perfume plants to make hand sanitizer, fashion labels are sewing face masks, and everyone from Nike to SAP and Adobe has mobilized around new messaging embracing empathy and transparency.

Some 62% of consumers say they’re more likely to buy products from companies they feel are doing good for society – and 29% are prepared to pay a premium for brands that contribute to the community. COVID-19 is a reminder of how quickly the ground can shift beneath your feet, and it demands equally rapid and agile capabilities in messaging to customers and employees. This not only helps avoid reputational damage, but keeps pace with the rapidly evolving expectations of consumers themselves. They expect action from updated company websites to changed commercial messaging across channels. Avoiding being caught flat-footed requires an agile approach to creative across any and all channels to mitigate brand risk: from external media to social, public relations, communications, digital and investor relations.

Growth drivers

Shifting the mix to new sales channels including virtualized sales.

It’s easy to forget that, despite rapid annual growth in e-commerce year after year, online sales still comprised only around 12% of the United States retail sector at the end of 2019. COVID-19 may dramatically shift that balance, both in the US and globally. Social distancing has required retailers to close and limited consumer movement, leaving e-commerce as the only viable sales option for many business-to-consumer brands. Fitness companies have shifted en masse to a new model, for example, virtualizing their class experiences in an attempt to transition memberships and services to mobile and over-the-top (OTT) experiences.

The dramatic pace of consumer adoption and sudden effort to create or accelerate direct-to-consumer sales has exposed significant operational stresses, such as dealing with third-party digital commerce partners, which offer less data and control of the customer experience. Business-to-business brands have also quickly moved to remote sales calls via new technologies, forging the path to higher margins and more self-service integration.

Extracting value from existing innovation to drive product strategy

In times of extreme health and economic distress, you’re unlikely to invest in new product development and innovation in struggling segments. Yet rapid innovation is happening in booming sectors like healthcare, retail delivery services, and digital service and communication offerings. For those unable to invest in innovation, COVID-19 is spurring action around more straightforward and important strategies to extract value from existing portfolios – from bundling and unbundling packages to pricing models and value propositions by customer segment. Able to pursue innovation? Listening through analytics becomes even more critical to create value, not only across social channels but across a full range of data sources including third-party commerce and community sites which offer critical signals which are not yet consistently fully mined for insights.

Customer experience

Prioritize digital journeys and new ways to engage and experience.

With the extreme nature of the pandemic, companies accelerated the move to digital-first or digital-only customer journeys. You now have a mandate to accelerate those efforts and lean into experiences offering more data to drive optimization of outcomes. Particularly as the economic recovery may not be swift, this may be an opportunity for both growth and cost reduction.

Move to journey/persona-based approaches and increase use of dynamic content optimization and personalization through all stages of customer engagement lifecycle

Use data and artificial intelligence (where possible) to optimize decisioning across customer journeys

Leaning into new ways to serve customers through virtualized service

Health and safety concerns limited on-the-ground workforce, call-center capacity, and customer operations. New protocols and capabilities were established for technicians and field operations, while the use of virtual service calls and self-service kits accelerated. For example, by April, Cox Communications had stopped visiting residences to service cable and internet customers, almost entirely shifting to remote service models. While not all services can sustainably move to new methods, some can. Emerging technologies can be explored, like augmented reality, to extend the brand and drive effective and engaging virtualized service.

The physical-digital divide

Solutions to deliver products to end users and drive last-mile innovation.

While many experiences have naturally transitioned to digital during the crisis, there are physical products with no replacement. The pandemic places new pressures on logistics and distribution, under extreme duress, to expand last-mile delivery capacity – Amazon alone is expanding its workforce by 175,000 to cope with increased demand. As grocery stores struggle to stock shelves amid consumer hoarding, new sources of supply have emerged including direct-to-consumer deliveries from restaurant suppliers who suddenly found new customers in a time where their core segments had completely disappeared overnight with restaurant closures. It is likely that innovation – from new last-mile real-estate plays to drones – is likely to proliferate.

Conduct an evaluation to rethink business strategy to re-purpose physical or digital space

Leverage a real-time, digital view of the organization’s supply chain to provide availability and alternatives to businesses using IoT, advanced analytics, and AI to optimize delivery

Develop proprietary solutions to reach customers anywhere at any time

(Chapter breaker)

5

Chapter 5

A mandate to act now

Quickly gauge and respond to evolving consumer behavior or risk being left behind.

If there is one thing we know about the current crisis, it’s that companies are going to need to reframe their futures around very different digital behaviors. Trends we expected to evolve over the course of several years have suddenly become new norms, presenting a jolting wake-up call for everyone. Companies whose transformation efforts were lagging before the crisis need to accelerate rapidly and use data and technology to connect the dots driving customer connections and revenue growth. And those who were well placed before COVID-19 must still grapple with significant changes to spending patterns and behaviors that will only become fully evident as economies and traditional activities recover.

If you understand your role in the new landscape, you can set yourself apart from those deploying business-as-usual pre-pandemic approaches. The time to act is now. Many of the sudden changes in behavior – both business-to-business and business-to-consumer – will not revert, and if you fail to heed the new mandate to think and operate differently, you may find yourself struggling to catch up.

Lead through the COVID-19 crisis

We have a clear view of the critical questions and new answers required for effective business continuity and resilience.

Contact us for immediate support

Summary

COVID-19 pandemic is shaping irreversible changes in consumer values, habits, consumption patterns and spending behaviors. To stay relevant, companies need to act now and set up a growth strategy focused on what they should do now, next and beyond COVID-19 to reframe their future around evolving consumer behaviors. Companies that act immediately will build lasting and meaningful relationships with consumers. Those who fail to respond and continue with their business-as-usual pre-pandemic approach will risk being left behind.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

Welcome to EY.com

In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. remember settings), Performance cookies to measure the website's performance and improve your experience, Advertising/Targeting cookies, which are set by third parties with whom we execute advertising campaigns and allow us to provide you with advertisements relevant to you, Social media cookies, which allow you to share the content on this website on social media like Facebook and Twitter.

You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website.